Key takeaways:
A limited-purpose flexible spending account (LPFSA) is an employer-sponsored account primarily used to pay for vision and dental expenses not covered by your insurance plan.
Some employers allow you to use your LPFSA to pay for regular qualified medical expenses after you reach your insurance deductible.
Unlike a regular health FSA, you can combine an LPFSA with a health savings account (HSA). For 2026, the LPFSA contribution limit is $3,400.
A limited-purpose flexible spending account (LPFSA) is a pretax account only available to employees enrolled in a qualified high-deductible healthcare plan (HDHP). These accounts are typically combined with a health savings account (HSA) to help families increase their healthcare savings during the plan year.
Unlike a regular health FSA, this employer-sponsored account is primarily used to pay for qualified dental and vision expenses. In some cases, you can use your LPFSA to pay for out-of-pocket expenses related to other qualified medical expenses after you reach your insurance deductible.
Below, we will discuss how an LPFSA works and what expenses qualify.
Search and compare options
How does a limited-purpose FSA (LPFSA) work?
An LPFSA works like a healthcare FSA when it comes to contributions and claims. Both the employer and individual can contribute funds to the account. The employer and individual must also decide on the contribution amount before the plan year. Employers that offer this benefit determine what type of expenses qualify for reimbursement.
Individuals can use their LPFSA for qualified expenses as soon as the account has funds. The employer determines if the individual will have a card to pay for qualified expenses or submit claims for reimbursement.
Who qualifies for a limited-purpose FSA (LPFSA)?
Employees with a qualified high-deductible healthcare plan (HDHP) and, typically, a health savings account (HSA) may choose to also have a limited-purpose FSA. This account is only available if an employer offers it. An LPFSA can be used for qualified expenses incurred by the employee, their spouse, and any eligible dependents.
Self-employed individuals do not qualify for an LPFSA or a traditional health flexible savings account (FSA). However, they can open an HSA if they have a qualified HDHP and want to gain tax benefits for health expenses.
Retired individuals and those who are unemployed also don’t qualify for an LPFSA. This account is exclusive to individuals who work for a company that offers limited-purpose FSAs.
What’s the difference between an FSA and LPFSA?
The difference between a limited-purpose FSA and an FSA is what they cover. An LPFSA can typically only cover qualified vision and dental expenses. On the flip side, health FSAs can cover a variety of medical expenses allowed by the IRS, such as acupuncture, mental health therapy, and monthly menstrual supplies. Some employers may allow you to use your LPFSA to pay for qualified medical expenses after you reach your insurance deductible.
How does a flexible spending account (FSA) work? From contribution limits to spending deadlines, here are a few items to consider if you enroll in an FSA.
Do you need sunscreen? Your sunscreen may be FSA eligible if it meets these requirements.
Health savings accounts (HSAs) vs. FSAs: While HSAs and FSAs both allow you to pay for qualified expenses, there are a few differences you should consider.
Another key difference is that an LPFSA can be paired with an HSA. You typically aren’t allowed to contribute to both an HSA and FSA at the same time. Having an LPFSA is an exception to that rule.
Both of these accounts allow employees to make pretax contributions. That means the money goes from your paycheck to the FSA before taxes are withheld. Every penny that you contribute to these accounts can reduce your taxable income. Let’s say you earn $100,000 and have an LPFSA. If you contribute $2,500 to it for the year, your taxable income drops to $97,500.
Employees can contribute up to $3,400 through payroll deductions to their LPFSAs in 2026, up $100 from 2025.The HSA contribution limit for an individual is $4,400 in 2026. This would result in a $7,700 tax deduction if you fully fund both accounts in 2026. However, if you contribute too much to these accounts, you could lose all your remaining funds at the end of the year.
Read more like this
Explore these related articles, suggested for readers like you.
The table below summarizes the differences between an LPFSA and an FSA.
Type of account | Medical expense coverage | Must have a high-deductible health plan (HDHP)? | Can be used with a health savings account (HSA)? |
Limited-purpose flexible savings account (LPFSA) | Eligible dental, vision, and some post-deductible expenses | Yes | Yes |
Flexible spending account (FSA) | Eligible dental, vision, and healthcare expenses | No | No |
Source: IRS
Which expenses are LPFSA-eligible?
Qualified vision and dental expenses are those used for preventative care. Cosmetic expenses won’t qualify. For example, a visit to the dentist for a checkup and cleaning is considered preventative care, but teeth whitening is not.
Visits to a dental hygienist, optometrist, and orthodontist all count as qualified visits. Here are examples of additional qualified dental and vision expenses:
Braces
Contacts
Dentures
Eyeglasses
Eye exams
Fillings
Root canals
Teeth cleaning
If you purchase nonqualified expenses with your limited-purpose FSA funds, your employer can deny your reimbursement claim. They may even have you pay them back for nonqualified expenses. You will lose the tax-advantaged benefits of your purchase if it is not qualified.
What are post-deductible expenses?
Post-deductible expenses are those incurred after reaching your annual health insurance deductible. This includes qualified out-of-pocket medical expenses that aren’t for vision or dental care.
For example: Let’s say your individual insurance deductible is $1,000. That means the majority of your insurance benefits won’t kick in until you pay the first $1,000 of vision and dental expenses.
After you reach your deductible, your LPFSA becomes more flexible. Any qualified out-of-pocket medical expenses that are not covered under your insurance plan may be paid for with your LPFSA.
Not all employers offer the option to cover post-deductible expenses with an LPFSA. Check with your account administrator to be sure you can do this.
Can you roll over LPFSA funds?
LPFSA funds are usually “use-it-or-lose-it” like those in a traditional health FSA. This means you cannot roll LPFSA funds over from year to year unless your employer offers this option. Contact your human resources representative to see if your company offers a grace period or carryover period to give you more time to use any remaining funds in your account after the plan year ends.
A grace period allows any unused funds left over from the previous plan year to be used up to 2.5 months after the plan year ends. If your employer offers a carryover option, you can carry over a specific amount of your funds into the next year. Your employer cannot offer both a carryover period and grace period for your LPFSA.
You should also be aware of the run-out period. A run-out period gives employees a certain amount of time — typically 90 days — to make reimbursement claims for expenses incurred in the prior year. If no claims are made by the deadline, you forfeit the funds in your account.
Can you use your limited-purpose FSA (LPFSA) and your HSA to pay for the same service?
An LPFSA can pair with an HSA to pay for specific qualified medical expenses. The two accounts cannot pay for the same service, though. But if you don’t have enough money in your LPFSA to pay for something, you can use the funds in your HSA to cover the remaining balance due.
Let’s say Devin’s out-of-pocket cost for his dental appointment is $750. If Devin only has $350 in his LPFSA, he can use all the money in that account and then use money in his HSA to cover the additional $400. Devin cannot request a $750 reimbursement from each account.
An individual can use their LPFSA funds to pay for vision and dental expenses before tapping into their HSA funds. This allows pretax dollars from the HSA to continue to grow while pretax LPFSA funds pay for vision and dental expenses.
The bottom line
A limited-purpose FSA may be a good consideration for those who want an additional tax-advantaged account to pay for high dental or vision expenses. Your employer may also allow you to use your LPFSA to pay for additional medical expenses after you've reached your insurance deductible. If you are enrolled in a high-deductible health plan and have an HSA, consult your human resources department to determine if your employer offers an LPFSA and, if so, how it works.
Why trust our experts?
References
FSA Store. (n.d.). What is an FSA “run-out” period?
Internal Revenue Service. (n.d.). Rev. Proc. 2025-32.
Internal Revenue Service. (2021). 26 CFR 601.602: Tax forms and instructions.
Internal Revenue Service. (2021). Additional relief for coronavirus disease (COVID-19) under § 125 cafeteria plans.
Internal Revenue Service. (2025). About Publication 502, medical and dental expenses.
